What I Learned Seed Investing Over the Last 10 Years презентация

Partner, SoftTech VC

Pre-Money Conference - Jun '14

Services startup in 1989
Acquired by Reuters in 1993
“Traditional” VC in the Valley since 2000
Angel/Seed Investing since 2004

SoftTech VC (@softtechvc)
10 years old
150 investments
30+ exits
$2B in follow-ons

Pre-Money Conference - Jun '14

Jeff Clavier

Charles Hudson

Stephanie Palmeri

hotness
Remember RSS readers?
Commenting and quoting posts was the engagement
Growth hacking meant “getting a blog post on top of Techmeme”

Seed rounds were smaller, Series A’s were$1M to $2M
It required a dozen angels and a few funds to fill these rounds
Syndicates were based on who you knew, not who was most relevant

Pre-Money Conference - Jun '14

own experience may vary ;-)

Pre-Money Conference - Jun '14

the best deals, you don’t have to be nice – you just have to be really good, which sometimes means making harsh decisions and passing quickly and explicitly on opportunities

Pre-Money Conference - Jun '14

listed 135 micro-VC firms in a recent study. 135!
Unless you have an established brand and track record, you need a differentiated strategy:
Geography, sectors and industries, stage, value-add, infrastructure and ecosystem

Pre-Money Conference - Jun '14

absolute filter
Sector, Location,…
How we summarize our criteria?

Answer Yes to:
Like these founders? Are they a particular fit for this market?
Are you passionate about the product?
Do you LOVE this deal?
When you start investing, you’ll love each and every deal
Is it fundable in 12 to 18 months?

Pre-Money Conference - Jun '14

what they don't know”
When you have that feeling about founders, it’s time to move to the next deal in the funnel
As you due diligence founders, markets and customers, every piece of information you collect should make you increasingly excited
Over time, you’ll develop a “spidey sense” that will tell you something is off – every single time I ignored it, I lost my capital

Pre-Money Conference - Jun '14

has pretty much disappeared
It’s all about executing better, faster and bigger
Competitors will pop up within weeks of your launch
And they will get funded
For investors, that means you can also wait for the right team

Pre-Money Conference - Jun '14

companies?

I passed on all of them because they did not feel interesting or performing – or I was “too busy”
How do you avoid the “Quick Pass”?
Ideally you‘d keep an open mind as to the merits of every opportunity, especially if founders are legit and you respect the referrer
PS: It’s really hard – still making that mistake too often

Pre-Money Conference - Jun '14

of angels, 1,000s of retail investors) capital is REALLY a commodity
Value add (experience, connections, expertise, brand name) will be paramount to get you in a deal
Building a strong syndicate that helps fix the shortcomings/challenges of founders is key
That’s why party rounds are so atrocious – no one cares, no one helps
Smart founders will optimize for “Investor Market Fit” - when they have several options

Pre-Money Conference - Jun '14

accountable is not being founder friendly – that’s wrong
Agree early on a reporting schedule and a simple one-sheet template
Summary of progress against plan / Highlights / Lowlights / KPIs / Cash on hand & Runway / Key asks to investors
Especially important if there is no board, and founders are first timers
Once you realize something is off, it is most likely too late – runway rarely allows for a “warm reboot”

Pre-Money Conference - Jun '14

in A/B rounds in the last 8 months
Suggestions
Have a clear “Hot or Not” map for sectors you invest in, and understand runway implications for the Not’s
Early on establish and validate hurdles to clear in order to get the next round
Pre-market early with the “most likely/best fit” group of investors
Even great, promising startups require solid runway

Pre-Money Conference - Jun '14

need to deliver a 4X gross return. About 25% will go to management fees and costs.
To produce a $200M total return, you’d need a 5.5X performance if you don’t put “fees in the ground”
200 / (50 * (1 – 25%)) = 5.5
Recycling means that you don’t distribute all proceeds back to LPs, or use your clawback clause
Cashflow/distribution optimization is tricky

Pre-Money Conference - Jun '14

that a real CRM is unavoidable (Sevanta)
Contact management is God awful (RelateIQ)
Need a scalable back-office for financial/LP reporting and audit (VMS)
Most community tools suck (GroupTie)
On top you need: fund website, community management, social media, events management

Pre-Money Conference - Jun '14

, Asshole!

Pre-Money Conference - Jun '14

Conference - Jun '14

$1M+ per initial investments
$35M = 50 deals @ $700K
$50M allocated to Series As and Bs follow-ons
Geos: SF/SV, NY, SoCal, Boulder, Toronto
Target ownership: 7 to 10%
Always syndicating with peer micro-VCs and angels

Sectors








New Areas: VR/glasses, BTC, drones, Digital Health

Pre-Money Conference - Jun '14

deal access and reputation as a value-added investor
By: Hustling, Blogging, Networking, Investing personal capital

SoftTech VC II
($15M, 65 deals)

Goal: Establish “institutional” angel model
By: Focusing on access as we defined investment strategy, syndicating, building brand and top dealflow

SoftTech VC III
($55M, 55 deals)

Goal: Execute on a refined, repeatable seed strategy
By: Building ownership in a select group of companies, and expanding the footprint of the firm

SoftTech VC IV
($85M, 50+ deals)

Goal: Iterate on Fund III’s model, expanding post-seed when appropriate (Seed Prime, Series A)
By: Building and maintaining 7% to 10% ownership through initial rounds of financing

Pre-Money Conference - Jun '14

2004

2007

2011

2014

“Super-Angel”

“Super-Angel”
Fund

Micro-VC Funds